1. 1 Session 5. Balancing Act: Reliability & Commercial Use

2. 2 David Wojick, Consultant “You’re not selling electrons; if you sold bricks, you’d be selling electrons.”

3. 3 So what are we selling? A service A reliable service But what does that mean, “reliable”? I don’t know what “reliability” is, but I know what it ain’t Blackouts, brownouts, etc. – when electric service isn’t there when I want/need it (and I want/need it 24/7)

4. 4 It’s Gotta be Really Reliable: Jack Welch’s Six Sigma (Defects Per Million Operations – DPMO) Allowed 3.4 DPMO w/ 6Σ (5Σ is 320 DPMO) Electricity: one hr. blackout every 33.4 yrs. New York City – George’s Career (1962-2005): 43 yrs. – 3 blackouts – ’65, ’77, ’03 – 66 hrs. 175 DPMO – between 5 & 6Σ Generation Adequacy: 1 day in 10 yrs. = 274 DPMO – close to 5Σ Best system: as fail safe as possible

5. 5 Pay for the Level of Reliability You Need ? Problems: 1.Nature of transmission systems prevent providing better reliability to individual customers. 2.Many different participants, and/or other systems, may have to spend money to improve reliability in one system.

6. 6 Gallia est omnis…. Distribution: Local blackouts – people can see the cause – people react…. Generation: Shortages, public appeals, brownouts, rolling blackouts (local) – price spikes – people react…. Transmission: Failure of Bulk Power System – cause not always obvious – total blackouts over large areas – people react….

7. 7 RELIABILITY: CAN THE MARKET PROVIDE Distribution: Yes, but mostly limited to large industrial & commercial Generation: Yes, thru massive DSM – but, will people accept Transmission: No, NO, NO !!!

8. 8 CAN THE MARKET PROVIDE RELIABILITY COST vs. RELIABILITY “Balance between cost & reliability” – no such thing! Reliability a base line – non-negotiable Comparable to air safety

9. 9 “The physics of the system hasn’t changed; the business has.”

10. 10 NERC and Its Role A Short History of Reliability Before 1965 Individual system criteria Fair degree of cooperation – e.g., joint studies Some organized groups – e.g., PJM, MAIN 1965 to 1997 Growth of Regional Reliability Councils (RRCs) RRC Reliability Criteria Culture of Cooperation & Coordination Interregional groups, studies (e.g., MEN, VEM, VAST) 1968 – NERC established by the RRCs Voluntary conformance – voluntary?! “Peer pressure” – common interests

11. 11 A Tortured Path 1992 FERC: anyone can build & own generation 1993 to 1997 Debate within NERC – “mandatory” vs. “voluntary” Jan. 1997 NERC Board: Conformance with NERC (& RRC) criteria should be mandatory July 1998 NERC Board expanded – 9 “independent” members to be added NERC to become NAERO

12. 12 … and so to bed BUT NERC/NAERO does not have legal authority to mandate conformance, or apply sanctions neither does FERC ergo, Energy Bill Are mandatory conformance & sanctions a solution in search of a problem? Or, are they required by the introduction of competition, and the shift in culture Anyway, already mandatory in NPCC (incl. NY)

13. 13 Major Present Threat Significant degradation of criteria in proposed revision to NERC Standard FAC 008-1 thru 013-1 (a.k.a. Standard 600) Future reliability is under grave threat NERC “Version 0” Standards – spin I Fear the Greeks Even When They Bear New Paradigms

14. 14 Three Steps to Reliability (or maybe four) 1. Establish Criteria Rigorous, thorough, clear and unambiguous, fair and non-discriminatory, measurable 2. Plan & operate in conformance Generators Transmission owners Electric Service Providers (ESPs), a.k.a. ESCOs Power marketers System Operators/control areas/ISOs/RTOs (or their functional or moral equivalents) 3. Monitor & assess conformance 4. Sanction non-conformers

15. 15 Reliability – National Level NERC (North American Electric Reliability Council) – minimum reliability standards NAESB (North American Energy Standards Board) – commercial standards Regional Reliability Councils – regional standards – must be consistent with NERC standards

16. 16 Reliability – Regional & Local NPCC (Northeast Power Coordinating Council) – regional standards/criteria NYISO (New York Independent System Operator) – operate NYS system, run commercial market NYSRC (New York State Reliability Council) – develop reliability standards/criteria, assess compliance with them

17. 17 “Electricity isn’t a commodity; it's a phenomenon.” Joseph Swidler, former Chairman of Federal Power Commission, and NY PSC “Reliability is in everyone’s best interest.” George C. Loehr